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Summary

• BoJ raised rates to 0.75% as expected
• Yen reaction weaker, but muted without guidance surprise
• Gradual policy normalisation remains base case
• JGB yields have risen, 10yr to highest since May 2006

The Bank of Japan raised its short-term policy rate to 0.75%, the highest level in three decades, delivering another milestone in its gradual exit from ultra-loose monetary policy. The 25 basis point hike, approved by a unanimous vote, was widely expected and had been fully priced by markets ahead of the decision.

With little surprise in the move itself, market attention quickly shifted to Governor Kazuo Ueda’s press conference and the outlook for further tightening. Several market participants noted that the rate increase alone was unlikely to generate sustained moves across currencies or rates without clearer forward guidance from the central bank.

The yen initially strengthened very small following the announcement but quickly gave back those gains, a move attributed by some to thin liquidity conditions amplifying short-term price action rather than a change in fundamentals. A number of analysts argued that a durable recovery in the yen would require a combination of more assertive BoJ guidance, credible fiscal discipline from policymakers and a more supportive external backdrop, particularly a softer U.S. dollar.

Others emphasised that the BoJ is likely to remain gradualist in normalising policy, given Japan’s long history of near-zero rates and the economy’s sensitivity to higher borrowing costs. From this perspective, the central bank is expected to signal future changes well in advance, reducing the risk of disruptive market reactions.

In credit markets, some participants expect Japanese corporates to increasingly seek funding in offshore U.S. dollar markets rather than domestically, potentially lifting issuance volumes. However, they noted that any pressure on credit spreads could be offset by solid economic growth, strong corporate balance sheets and sustained investor demand for Japanese credit.

Rates strategists largely downplayed the impact on Japanese government bonds, arguing that supply-and-demand dynamics — including issuance patterns — are likely to remain the dominant driver rather than macro policy shifts. With much of the expected terminal rate already priced in, further JGB weakness may be limited.

Looking ahead, opinions diverge on the yen’s medium-term path. Some see scope for renewed weakness as carry trades reassert themselves, while others argue that Fed easing and higher hedging ratios by Japanese investors could support the currency over time. For now, markets await further clarity from Governor Ueda on how cautiously the BoJ intends to proceed into 2026 and beyond.

This article was written by Eamonn Sheridan at investinglive.com.

The suspected killer, Claudio Manuel Nueves Valente, 48, was a graduate students in physics at Brown University in the early 2000s.

The hike comes against the backdrop of rising inflation and a weak Japanese economy.

European Union countries have agreed to allocate 90 billion euros ($105.5 billion) in aid to Ukraine for 2026 and 2027, the EU Council President said on Friday.

Summary

• BoJ raised policy rate to 0.75% as expected
• Decision was unanimous, but wording saw dissent
• Real rates remain significantly negative

The Bank of Japan raised its short-term policy rate by 25 basis points to 0.75%, delivering a widely anticipated move that takes borrowing costs to their highest level in around three decades. The decision was approved by a unanimous vote, underscoring broad agreement among policymakers that conditions now justified a further step toward normalisation.

Despite the hike, the BoJ was careful to emphasise that monetary conditions remain accommodative, repeatedly highlighting that real interest rates are expected to stay significantly negative even after the policy adjustment. Officials said the move should be seen as part of a gradual and cautious process rather than a shift toward restrictive policy.

In its statement, the central bank said it would continue to raise the policy rate if the economy and prices move in line with its forecasts, signalling conditional openness to further tightening. Policymakers added that the likelihood of achieving the baseline scenario has been rising, reflecting growing confidence that inflation dynamics are becoming more durable.

The BoJ reiterated that it will conduct policy from the perspective of sustainably and stably achieving its 2% inflation target, while avoiding excessive tightening that could destabilise financial conditions. Officials said wages and inflation are likely to continue rising moderately in tandem, reinforcing the narrative that price pressures are increasingly supported by domestic demand rather than temporary cost factors.

However, the meeting also revealed nuances within the Policy Board. Board member Takata opposed the description of the inflation outlook, arguing that the rate of increase in CPI, including underlying measures, had already generally reached the price stability target. Separately, board member Tamura opposed the wording on underlying CPI inflation and said it was likely to be broadly consistent with the target from the middle of the projection period.

These objections did not extend to the rate decision itself but highlight an emerging debate over how close Japan is to achieving price stability on a sustained basis, a discussion that could shape the pace of future tightening.

From a market perspective, the decision was said to be fully priced, limiting immediate volatility in the yen and JGBs. Despite this the yen fas dipped, with USD/JPY popping above 158.00. Focus is expected to remain on guidance, wage trends and how confidently the BoJ views inflation sustainability heading into 2026.

Overall, the message was clear: normalisation is progressing, but the Bank remains committed to moving slowly, carefully and data-dependently, with no preset path for further rate increases.

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Due at 0630 GMT is Bank of Japan Governor Ueda’s news conference

This article was written by Eamonn Sheridan at investinglive.com.

The EUR/JPY pair extends its upside to near 183.00 on Friday as the Japanese Yen (JPY) weakens, after the Bank of Japan (BoJ) monetary policy announcement. The pair rises further after the BoJ raised its interest rates by 25 basis points (bps) to 0.75%.

The GBP/JPY cross attracts some dip-buyers during the Asian session on Friday and stalls the previous day’s late pullback from levels just above the 209.00 mark, or a fresh high since August 2008.

West Texas Intermediate (WTI) Oil price loses ground for the second successive session, trading around $55.80 per barrel during the Asian hours on Friday.

Japan BoJ Interest Rate Decision meets expectations (0.75%)

The Bank of Japan raised its short-term policy rate by 25 basis points, lifting it to 0.75%, in a widely anticipated move that marks the highest level in roughly three decades and underscores the central bank’s gradual shift away from ultra-loose policy.

I’ll have more specific detail on the statement and associated BoJ releases soon, but for now I want to note the following.

The decision had been fully priced by markets following a steady drumbeat of firm inflation data and increasingly confident signals from policymakers. As a result, the immediate market reaction was muted, with attention quickly turning from the rate hike itself to the Bank’s forward guidance and Governor Kazuo Ueda’s assessment of the path ahead.

In its statement, the BoJ acknowledged that inflation has remained above its 2% target for an extended period, supported not only by imported cost pressures but also by firmer domestic price dynamics. At the same time, policymakers emphasised that real interest rates remain clearly negative, reinforcing the view that monetary conditions are still accommodative even after the hike.

Governor Ueda will likely strike struck a cautious tone in his press conference, stressing that future adjustments will depend on whether inflation proves sustainable and demand-driven. He’ll highlight the importance of wage developments, household consumption and corporate investment, while also noting the recent rise in Japanese government bond yields and the need to avoid destabilising financial conditions.

Markets continue to debate the timing of the next move. While some pricing points to another hike as early as mid-2026, others argue the bar for further tightening has risen, particularly given lingering uncertainty around global growth and the transmission of higher rates through Japan’s highly leveraged public sector.

From a market perspective, the lack of surprise reduced the risk of volatility seen during earlier policy shifts. Unlike past episodes that triggered sharp yen-funded carry unwinds, the currency’s reaction this time is likely to be driven more by guidance than by the rate increase itself.

Overall, the decision reinforces the BoJ’s message: policy normalisation is under way, but it will proceed slowly, cautiously and data-dependently, with no preset course for further tightening.

Bank of Japan Governor Ueda’s press conference begins at 0630 GMT / 0130 US Eastern time.

This article was written by Eamonn Sheridan at investinglive.com.